This week saw little movement in XRP, with Bitcoin, Ethereum, and Solana experiencing notable declines, reigniting discussions about a long-anticipated separation. However, data on correlations, ETF inflows, and a challenging 30-day performance indicate a more intricate situation.
This article may include affiliate links. Flywheel Publishing may earn a commission from any actions taken through these links.
XRP (CRYPTO: XRP) experienced only a slight decline of 0.1%, making it one of the more resilient major cryptocurrencies. In contrast, Bitcoin (CRYPTO: BTC) saw a 2% drop, Ethereum (CRYPTO: ETH) fell by 3.4%, and Solana (CRYPTO: SOL) declined by 2.8%. With XRP priced at $1.30 and Bitcoin around $80,268, some investors believe this may signal a decoupling from Bitcoin.
Despite XRP’s stability this week, the correlation with Bitcoin tells a different story; data shows a strong daily correlation of 0.97 over the past week, indicating that the two cryptocurrencies have largely moved in tandem. Over longer time frames, this correlation remains significant, recorded at 0.91 for 30 days, 0.89 for 90 days, and 0.85 historically.
This indicates that although XRP had a relatively stable week, it closely aligned with Bitcoin’s performance rather than genuinely separating. Is this perceived autonomy truly valid, or is XRP simply declining at a slower pace than Bitcoin?
Understanding XRP’s 0.97 Correlation with Bitcoin
Correlation measures the extent to which two assets move together, based on their daily returns—the percentage change from one day’s closing price to the next. A correlation value of 1 implies that both assets rise and fall in unison, while a value closer to zero indicates a negligible relationship.
It’s important to note that correlation primarily captures directional shifts rather than the intensity of price movements. Consequently, if XRP decreases only half as much as Bitcoin on certain days, it might still exhibit a high correlation due to their simultaneous movements.
Traders keep a close eye on these correlations, as a declining figure can signal the beginning of a divergence between the two assets. Unfortunately for XRP, the data indicates it has become more entwined with Bitcoin over the past week. Its relative steadiness primarily resulted from a smaller drop during Bitcoin’s downturn, rather than indicating any true independence.
XRP’s Stable Week Masks a Weak Month
Even though XRP’s slight weekly change appears favorable, its monthly performance paints a contrasting picture. Over the last 30 days, XRP has declined by 18.8%, whereas Bitcoin has only dropped 5%. Year-to-date, XRP is down 29.1%, compared to Bitcoin’s 7.7% decrease.
In the last year, XRP has experienced a 49.8% loss, while Bitcoin’s decline stands at 27.7%. This trend indicates that XRP often mirrors Bitcoin but tends to react more dramatically during downturns.
While the flat performance following a month of significant losses might imply a reduction in selling pressure, it could also indicate waning trading activity. For instance, spot XRP ETFs recorded only $18.8 million in trades on October 23, down from over $102 million on October 2.
A solitary indication of a potential shift occurred in the 24 hours before October 25, when XRP gained 1.4% while Bitcoin fell by 0.4%. However, this single-day uptick does little to impact the broader 30-day correlation.
ETF Trends, Swell Conference, and Short Sellers Might Propel XRP away from Bitcoin
One significant factor that could drive XRP apart from Bitcoin is the influx of capital into spot XRP ETFs, which directly hold XRP. From October 19 to October 23, these funds experienced a net inflow of approximately $4.3 million, including substantial contributions of around $709,000 on October 21 and $3.5 million on October 22.
However, the total net assets of these ETFs decreased from $1.77 billion on September 25 to $1.48 billion on October 23, reflecting that price declines have overshadowed the inflows. A few million dollars each day is clearly insufficient to divert XRP from Bitcoin’s influence.
Additionally, the upcoming Ripple Swell conference taking place from October 27 to 29 in New York, along with the XRPL Apex developer conference, could be significant. While previous conferences have not produced lasting increases for XRP, any announcements about payments or tokenization within the XRP Ledger might lead to greater demand independent of Bitcoin.
Furthermore, an increase in short selling presents another dynamic. Reports have indicated a rise in XRP margin shorts on Bitfinex, jumping from about 148,850 to around 300,000 in just under two weeks. If these numbers are accurate, an increase in XRP’s price could trigger short sellers to buy back coins, potentially leading to a short squeeze that elevates the demand for XRP.
Is XRP Truly Decoupling from Bitcoin?
In summary, XRP has not detached from Bitcoin. During the week ending October 25, although it experienced a smaller drop than Bitcoin, it continued to mirror its movements closely, achieving a correlation of 0.97. This ongoing relationship indicates that XRP remains influenced by Bitcoin’s trends rather than establishing a distinct path. A week is too brief to draw conclusions about separation, particularly in light of a month where XRP declined by 18.8% compared to Bitcoin’s 5% drop.
Nevertheless, two key developments could alter this scenario. First, spot XRP ETFs would need consistent daily inflows nearing the $22.6 million recorded on September 25, rather than sporadic influxes, as seen in October. Additionally, XRP must maintain its position above its 50-day average around $1.41 on days when Bitcoin declines, to bolster its chances of breaking free from Bitcoin’s grasp.
For inquiries or corrections, please contact [email protected].